Figure 13-8. Kerrigan Lumber Yard receives 12,000 large trees each year that they process into rough logs. Currently, Kerrigan sells the rough logs for $75 each. Kerrigan is considering processing the logs further into refined lumber. Each log can be processed into 200 feet of refined lumber at an additional cost of $0.40 per foot. The refined lumber can be sold for $0.95 per foot.
-Refer to Figure 13-8. Should Kerrigan process the rough logs into refined lumber?
A) Yes, income will increase by $35 per log.
B) Yes, income will increase by $110 per log.
C) Yes, income will increase by $75 per log.
D) No, income will decrease by $35 per log.
E) No, income will decrease by $110 per log.

Question

Quizplus · Accepted Answer

The additional revenue from processing each log into refined lumber is $190 (200 feet x $0.95), and the additional cost is $80 (200 feet x $0.40). The net increase in income per log is $110 ($190 - $80), which means the income will increase by $35 per log compared to selling the rough logs for $75.